CIPFA disciplines officers for negligence over Icelandic investments

Four finance managers at two councils have been disciplined by their professional body for financial mismanagement surrounding investments in Icelandic banks in the run up to the 2008 credit crunch.
The disciplinary committee of the Chartered Institute of Public Finance and Accountancy has announced it has taken action has against three officers at North East Lincolnshire Council and one at at Bridgnorth District Council. Three reprimands were issued, while Alan Madin, the former executive director of corporate services, director of finance and section 151 officer at the former, was issued with a 12 month suspension order.

In a statement, CIPFA said: “In reaching its decision the committee took account of the fact that the case involved the investment of significant sums of public money with disregard for the unfolding events and that Mr Madin had an informal and outdated management style that did not enable him to exercise proper control.

“His conduct seriously undermined public confidence in both the profession at large and in him as a professional accountant. He failed in his duty as a section 151 officer, as a senior public official and as a Member of the Institute.”

Madin had failed to apply proper assurance systems and control arrangements or have in place effective arrangements for the identification of and reporting on control failures, the committee said.
In particular, it found that Madin had failed to ensure adequate supervision and support for the council’s treasury manager, Alan Thomas, to act on deterioration in credit ratings of a number of counterparties with whom the council had placed money.
He had also failed to ensure that required approvals for investments were signed by the appropriate staff, and failed to keep himself sufficiently informed of the challenges facing the council’s treasury management between December 2007 to October 2008.

Madin had also failed to make sure that investments did not take place with banks with credit ratings lower than those set out in the council’s annual investment strategy, CIPFA found.
In deciding to impose the 12 month suspension, the committee said it “took account of mitigating factors including Mr Madin’s previous exemplary character, that Mr Madin had made some admissions, that he displayed some remorse for and insight into the events and that the conduct was not dishonest”.
Thomas was issued with a reprimand for his role in the affair, with the committee finding that he also failed to keep himself and line managers informed of the challenges posed by Icelandic investments.
He was also found to have breached the International Federation of Accountants code of ethics for failing to make appropriate use of information that he did have.

A statement by CIPFA said: “Because of poor management control and his own actions Mr Thomas caused public monies to be invested in institutions which were known, widely and publicly, to be in financial difficulty. Although he had limited support and, apparently, insufficient time to read documents sent by the council’s treasury consultants, it was incumbent on him to keep abreast of the developing financial situation.”

The committee said it had taken account of Thomas’ previous exemplary character, that he had made some admissions, that he displayed remorse for and insight into the events and that the conduct was not dishonest.
A reprimand was also issued to Simon Riley, Madin’s deputy, for failing to ensure staff complied with council treasury management policies, and to alert his boss of some matters.
But CIPFA said the committee “took into account that Mr Riley did not have a key role in treasury management and that his practical involvement in treasury management affairs was very much more limited than that of other senior officers”.

Separately, CIPFA issued a reprimand to Steve Ogram, for his role as head of finance and director of finance of Bridgnorth District Council in and around 2008.
CIPFA found Ogram had failed to ensure compliance with the council’s treasury management policy, and systems to ensure decisions were subject to rigorous analysis.
It said that he had failed to make sure that the council’s treasury management practices document was adequately maintained, meaning that the list of permitted investment counterparties was unclear.
In addition, he had permitted the continued use of a confused ratings policy and inadequate checks on the financial standing of counterparties.

1 Comment

[…] we have come to recompense for the people responsible for losing taxpayer money Iceland is an announcement this week from CIPFA (Chartered Institute for Public Finance and Accountancy) that four council officers would be struck […]

Register to become a Room151 user

Latest tweets

London’s councils applaud extension of business rates pilot: London Councils, representing the capital’s 32 borough councils and the City of London, and the mayor of London have welcomed the decision in last week’s provisional local government… dlvr.it/Qtn10f

Provisional Settlement Does Nothing to Help Local Authorities: Last week’s provisional settlement for local government was predictably disappointing, says Richard Harbord, while the big issues of funding social care and council tax reform wait… dlvr.it/Qtn0zW

Deprived areas benefit least from efforts to soften cuts says IFS: A new study from the IFS says that the extra money made available by central government to help deal with funding cuts has benefited better-off areas more than poorer ones.[...] dlvr.it/Qtd5zq

Population proposed by ministry as sole factor in foundation formula: The Ministry of Housing, Communities and Local Government launched a consultation yesterday, which will close on 21 February next year, as the next step in its Fair Funding Review,… dlvr.it/Qtd5zp

Study finds home care fees still under pressure: Most local authorities are continuing to try to drive down the fees paid to providers of home care, according to a new study from the King’s Fund and the University[...] dlvr.it/QtYFT8

Leeds proposes 3.99% council tax increase: Leeds City Council has proposed raising council tax by 3.99% and cutting 74 jobs in its budget plans for 2019-20. The council is facing a £24.3m deficit as a result[...] dlvr.it/QtYFRv

UK domiciled funds may benefit from Brexit: Money market funds domiciled in the UK could see increased inflows in the run-up to an increasingly messy Brexit from institutions wanting to play it absolutely safe. Onshore funds (those[...] dlvr.it/QtYFR6

West Berkshire ruling complicates development schemes: The recent Court of Appeal decision calls into question local authorities’ ability to enter development agreements without following public procurement rules, says Helen Randall Is your authority… dlvr.it/QtN60Z

30 names handed to CPS over Northampton Borough Council loan: Police are ready to send files on 30 people to the Crown Prosecution Service (CPS) over £10.25m lent by Northampton Borough Council for the redevelopment of the town’s football ground.[...] dlvr.it/QtN5y9

The implications of improved LGPS funding positions on cashflow: Significantly improved funding ratios in March 2019 valuations provide local government pension schemes with some interesting choices, says Karen Shackleton There has been much discussion… dlvr.it/QtGglYpic.twitter.com/02wCGTDvMy

CCLA cautiously bullish on equities: CCLA, investment manager of over £1.5bn of local government assets, remains optimistic on equities. At its Investment Seminar for Local Authorities held in London this week, James Bevan, chief investment[...] dlvr.it/Qt43fj

2nd LATIF North to take place in the build up Brexit: Room 151 will hold its regional Local Authority Treasurers’ Investment Forum, LATIF North, at the Midland Hotel, Manchester on 21 March 2019. This will be the second LATIF North, following[...] dlvr.it/Qt0vNX

PWLB money stokes bonfire of the LOBOs: London Borough of Croydon has repaid £100m of Lender Option Borrower Option (LOBO) loans using money from the Public Works Loan Board (PWLB). The deal is understood to be the[...] dlvr.it/Qt0BMP

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we'll assume that you are happy to receive all cookies from this website.OK